VAT Clarification and Extension

Both - it depends on the merchant - some may work out their overheads, add their profit margin, add VAT and then round to a "nice" number.

Some may price (with VAT) according to what the current market price (with VAT) is - in which case if they have any common sense they'll calculate what their profit margin is after taking off VAT and overheads, just to make sure that they aren't making a loss (if they are there are too choices - increase the price or reduce overheads).

In practice, it is probably a mixture of both - the initial one to get an ideal price which is then adjusted according to the market conditions using the second to keep a check that it is still profitable.

Matthew

In normal circumstances inside Europe it works this way. But for LL? Do you think it has enough VAT paid to offset the VAT it collects? Maybe it does. But this law applies to LL even if LL had no Brighton presence (leaving aside enforcement difficulties for the moment). Isn't that clearly a case of Brussels trying to disadvantage non-EU businesses (ie, protect its own), because non-EU businesses who do not have VAT payables in the EU cannot offset in the EU and hence bear a greater VAT burden than EU-based businesses?

How is the punitive to merchants?

It terms of determining the pricing - taking VAT into account is not different from taking other overheads into account.

As regards "nice" prices - well if the merchant wants to pocket 9.99 after VAT but that produces an ugly price of 11.68, the merchant would normally price at 11.99 (thus getting a few extra pence which isn't punitive to the merchant). If the market won't support that price (i.e. it doesn't sell as being too expensive), the merchant might try pricing at 11.49 (thus getting a few pence less than the would like but hopefully not enough to wipe out their profit entirely) etc.

I can't see that this is a big deal - there is a little noise caused by rounding to "nice" prices after adding VAT but this is sometimes in the merchants favour, sometimes in the buyers favour.

Matthew

I'd say so Victorria but the US protects its own too. I can't recall the fine details but I remember a while back we were having a tit for tat spat over tariffs on steel.

Okay that makes sense, but that still strikes me as government manipulation of pricing, again coming from my perspective of the US (and having lived in Europe a lot over the years as well). Pricing that is "tax neutral" may be less friendly at the till, but allows merchants to price on their non-sales/VAT-tax related costs. But again this is a mindset issue. I don't think I'll ever see all-in pricing as a good thing, despite its till-friendliness, due to this impact on business pricing decisions. In the US, most goods and services (other than very big ticket items like cars) are priced in a tax neutral manner.

Okay, but as an American I can in no way support Brussels' extraterritorial and discriminatory taxes here. I know you aren't one of the Europeans who is screaming about discrimination against Europeans, Ciaran, so this isn't directed at you, but others who are screaming about discrimination against Europeans should step back and realize that this entire regime discriminates against non-EU business who have no VAT offsets.

Yes the US passed a Tariff on steel of depending on the product of 8 to 30%, which was recinded before its expiry date in 2005. The WTO took a stance against it.

The VAT amounts to a 15-20% Tariff on EVERYTHING.

Actually the VAT would count as an illegal subsidy to the WTO if the US hadn't signed off on allowing it in 1955 when the rates were far lower.

Gee, interesting little detail Colette. Didn't know that. Maybe there should be a sunset provision on tax agreements after half a century or so? Or after one side makes an egregiously large change?

/me scurries off looking for boxes of tea to dump into Boston harbor. [For Europeans, an 18th Century tax protest in the American colonies that helped precipitate the American Revolution. Look thou, and consider likewise.]

The entire EU is questionable in theory, but it was tolerated because of the other exigencies of it at the time. And now we have our own trade blocs and zones, so we have kind of agreed to it over time, but the idea of a multinational tariff union was not the idea of classical international trade law.

Yeah Googling it is a little tricky since "VAT" leads to dozens of other things, and of course you have to be careful of the ultra conservative sites that claim the VAT is nothing less than a Trade war.

But what it looks like is that European companies get to claim large portions of the VAT for remittance because of costs of doing business, while US companies of course can only claim costs of business directly purchased from the EU. So it works as a subsidy to European businesses - A protective Tariff.

And since many EU countries have raised the rates recently the effects are more obvious.

Not everything Colette, some items are VAT exempt, some items have a zero VAT rating. If your business has a turnover below a certain threshold, you don't have to charge VAT.



Surely they did that for a reason though. VAT started to expand a lot during the 1980's, it was increased and put on new items. This was to allow for income tax cuts.

Ciraran, Hon. Please go to the Pub and have a few pints. I'm scared your head is gonna explode at any moment.

Not much more time for that .. an hour or so? *looks at clock*

Oh yes. They really need to change that.

We study history in Europe, too

Yeah, but it's easier for you guys. You just have to look out the window.

Seriously though, this is good advice for all. All this is still raw, and so people are understandably upset, but other than the notice that LL didn't give, and now have, there is not much more that can be done.

I really think an alternative version that displays based on connecting IP might be the way to go - I'm not sure if that's possible, but something along those lines. This is a pretty unique situation that has caught LL and residents on the hop, and so some serious planning needs to be done - simply charging extra on top of the listed fees_for_all to cover the VAT obligations for european residents will only lead to continued confusion for those new residents as they join SL, and that confusion = more headaches for LL.

Plus it's degenerating into the usual Trans Atlantic pissing contest.

I'd best down a few pints so I can get a good range then

LL wants SL to be believable to the outside world and their idea on how to achieve that is to appeal to the education and non-profit sector to the point of actively offering them sims at a net loss to them.

A sim on its own won't cost them $150/month to host, but you have to factor in the hundreds of thousands of active basic accounts who don't pay anything for their use of SL but who make up the largest percentage of the cost to run the grid.

Okay - ALMOST everything the EU imports past the pretty darn low for a business threshold.



They made a concession in 1955. At the time the US had a trade advantage, since Europe had been like bombed to heck 10 years earlier and stuff. It was thought to be a low risk concession since the VAT was between 2 and 4% in 1955.

Umm .. actually this isn't the purpose of depreciation ... Depreciation isn't an allowance, it's a requirement under FRS 18 to ensure that business costs are matched against revenues in the period in which they occur. The "cash" has already been spent when the asset was acquired; depreciation ensures that the cost is spread fairly over the life of the asset and not all charged against profit in the year of acquisition. The effect on profit is the same as if it were an allowance of course, but really it's not.

Yeah you're quite right, I do need to get a life

/me sings..."When the Rain comes"

Drinking is a good remedy for tax headaches .. but of course you're paying VAT on the booze anyway.

Brenda my head won't explode unless there's pie or panties involved!